Watch out when the government begins deciding “what is fair”…
America has reason to be optimistic right now… Unemployment is at 4.1%, the Dow Jones Industrial Average just climbed past 23,000, and the economy is picking up.
President Donald Trump, unlike his predecessor, takes a favorable view of the market’s animal spirits. He has pulled the federal government’s regulatory tentacles off the throat of private industry, and now the administration is looking for some dramatic tax cuts to help rev up gross domestic product (GDP) growth in 2018.
But as we all know, this can change.
If Congress does not tackle our $20 trillion debt, it is a mathematical certainty that economic disaster will follow – it’s only a question of when. And our politicians, who out of political cowardice and self-interest refuse to address this looming threat today, will only make the debt crisis worse when it strikes.
In fact, there is a strong case to be made that the American political Left would see tremendous opportunity in a debt crisis. The threat of imminent economic collapse is a great excuse for a socio-economic “reset,” which would open the door wide to a massive redistribution of wealth. Such fear-induced socialism will be justified under the rubric of “social justice.”
Social justice is a term that’s hard to define, but it is a potent force in politics and markets. It’s at the heart of the progressive orthodoxy in America. And it’s a fallback talking point for any leftwing policy that involves the government subordinating the rights of the individual to the “collective good.”
In practice, it means the Democrat-Left can toss private property, enforcement of contracts, and the very rule of law itself aside in favor of “what is fair.” This is even more true during an economic panic.
Accepting – or rooting for – economic crisis is counterintuitive, to be sure.
With another recession or even depression, hundreds of millions of Americans would suffer. The suicide rate, based on historical data, would skyrocket. Homes would be lost and businesses destroyed. And this time, the despair will be livestreamed on Facebook, which in turn would exacerbate the political instability.
Yet a pandemic of financial pain would provide an enormous opportunity for the Bernie Sanders wing of the Democratic Party.
The masses will clamor for scapegoats and financial bogeyman… and the Leftists and a complicit media will gladly point fingers. The public will not want to hear lectures about irresponsible spending on Medicare or the gargantuan growth in the welfare state over the last 50 or so years.
The playbook for the Left in a debt crisis will be unrestricted class warfare. That means that “fat cat” bankers, greedy corporations, and anyone who has been too successful or advocating free market principles too loudly in public will become targets.
And the solution will be – you guessed it! – more government. The poor financial decisions of the past will be blamed entirely on the reviled “1%.” For the other 99%, there will be a laundry list of excuses for every mistake made along the way.
Drowning in $50,000 of student debt? Well, college should have been free anyway. (CHECK)
Ran up $20,000 in credit-card charges? You deserve all that stuff that you can’t remember you bought. (CHECK)
Signed on the dotted line for a subprime car loan? Lenders should have known better than to trust you. Suckers. (CHECK)
When the crisis comes, trillions of dollars of government and household debt will become somebody else’s fault, and their responsibility.
That this is not mathematically possible doesn’t mean it won’t be politically advantageous. After all, the federal government has a printing press for money and near-endless taxation powers to move assets from one group to another. Politicians don’t have to make the numbers work, they just need sound like they are favoring the little guy over the cigar-chomping, monocle-wearing capitalists who caused all the problems.
This class warrior rabble rousing will be popular because people always want to believe someone else is to blame. We’ve recently seen the progressive Left in action on this. Back in 2008, we were told the entire financial system was on the brink of annihilation. Bernanke, Paulson, and the whole government-banker industrial complex told the American people we were at the economic equivalent of DEFCON 2.
Who got us there? According to the Left, it was the fault of Wall Street, and only Wall Street. The rewriting and whitewashing involved has been astonishing. The average American believes that financial institutions simply conjured up all those mortgage schemes out of thin air, and then in an act of maniacal greed, almost destroyed the global economy.
Sure, Wall Street was greedy and reckless. But the government also played a huge role in the 2008 crisis. For decades leading up the mortgage meltdown, the feds had been erasing lending standards. Starting with the Community Reinvestment Act of 1977, and all the way up through the Bill Clinton and George W. Bush administrations, access to credit was no longer a financial issue, but a civil rights issue. Banks were told to lend to borrowers from underserved communities, or risk federal lawsuits and media shaming for racism.
None of that narrative made it into The Big Short, arguably the most culturally authoritative account of the last financial crisis. Nor were any of the main characters in that film found wondering aloud about the role that Fannie Mae and Freddie Mac played in the financial engineering catastrophe.
The Great Recession of 2008 thus became solely the fault of rich bankers… while the federal government that gave them the oil-soaked rags and lighter escaped blame entirely.
Here we are a decade later, and the government is carrying more debt than ever before. So are American households.
There are rumblings from mainstream Democrat politicians about forgiving $1.3 trillion in student loans. Free college, free healthcare, and even free housing are rallying cries among the millennial generation that knows the government can’t pay its debts. If Uncle Sam can walk away from its obligations, why can’t they?
Revolutions, like bankruptcies, happen gradually… then suddenly.
There is a surge in socialist sentiment in America right now. We should stop assuming that all sides of the political spectrum want to avoid a debt crisis. For the growing contingent of Americans who believe that social justice is the single most important goal of society, there is no better way to put all matters into the hands of the state than to bring about the collapse of the free market.
Buck Sexton is host of the nationally syndicated talk radio program, Buck Sexton with America Now, heard on over 100 stations across the country.
A former CIA and NYC Police Department Intelligence Officer, Buck is also the co-host of Stansberry Investor Hour, a weekly radio show that you can subscribe to for free right here: